GBP: Under pressure and pushing down from here - ING

The combination of lacklustre UK economic data and political noise has served to highlight GBP's vulnerabilities this week and Viraj Patel, Analyst at ING expects these factors to further weigh on the currency.

Key Quotes

“The ‘hot, but not too hot’ core inflation release yesterday has all but silenced any 2017 BoE rate hike calls; markets see a ≈20% chance of a 25bp rate increase by year-end. Those looking to wage growth as evidence for rising underlying price pressures are unlikely to find much support in the UK jobs report today. We expect average hourly earnings growth to remain unchanged at 2% – and stay pretty much anchored at this level for the rest of 2017. This might not come as too much of a surprise to markets given that it would be in line with the BoE's forecasts outlined in the Aug Inflation Report.”

“Yet, the bigger question is whether wage inflation can pick up to 3% in 2018 as the Bank predicts; such a sharp uplift in earnings growth is unlikely given signs of greater than anticipated slack in the labour market, as well as doubts over the Phillips Curve relationship. We expect GBP to remain on the back foot today, with GBP/$ moving below the 1.2850/60 area (100-dma) and EUR/GBP grinding higher towards 0.9140/50.”